We need to refocus our discussion of inequality in the United States.
Social scientists have been focusing on inequalities for years, but recent discussions seem almost exclusively to emphasize social inequalities tied to race and gender, educational deficits, or interpersonal interactions. In the nation with the largest income and wealth inequality in the OECD, this just won’t do.“While the world around us has changed drastically, our research questions have not.”
There is growing recognition across the political spectrum that extreme economic inequality is a problem that needs to be addressed—and soon. While the world around us has changed drastically, our research questions have not. The consequences of the shift in how global economies work (and the lack of change in how social science tackles the problem) are grave. We lose credibility as we do the same things, year after year, trying to answer questions and promote changes that won’t really put much of a dent in overall income and wealth inequality.
To waste this twenty-first century moment would be a pity and actually affect the lives of future generations in ways large and small. Both major political parties now talk about inequality and opportunity. Many on the political left and right think that the system is rigged against them. In short, there is now a wide-ranging discourse on things that most social scientists have known for years. What are those things?
With extreme economic inequality, social mobility declines. Rewards that may have been earned by one generation are passed to those whose claims bear no relationship to anything except an accident of birth. The legitimacy of the market system is eroded as the relationship between what you do and what you get becomes more and more obscure. Almost nobody thinks the answer to the inequality problem involves picking your parents wisely.1
Extreme economic inequality allows the well-heeled to buy political influence others can’t have. The temptation to do this is overwhelming. One could argue that this has always been the case but the post-1980 rise of K Street lobbyists and the deliberate rigging of the US tax code to put money in the pockets of those who have already won the game (and worse, to rig the tax code against everyone else) gives even further advantage to the well-heeled and gives them the impression that the system can be rigged with a few phone calls and some lobbying of senators and Congress members.2
Extreme economic inequality leads to even more misguided understandings of success. People attribute good outcomes to their own efforts and bad outcomes to social circumstances. Social psychologists have known this for years. This type of “attribution error” is even more corrosive as inequality becomes more extreme. The wealthy and well-provisioned are born on third base and think they hit a triple. The poor and downwardly mobile middle class (basically, 80 percent of the rest of us) are labeled as “losers,” “lazy,” “non-producers,” or worse. In the long run this leads to an economic system with privately hoarded gains and publicly subsidized losses.3
Extreme economic inequality leads to disinvestments in public goods. The well-heeled don’t need them because they can purchase alternatives to public services and hoard the benefits they create. Worse still, they can opt out of public services everyone else relies on. At the extremes, the affluent can build entire alternative communities to escape where the less worthy can’t go—gated communities, private schools, private highways, private police forces, and private healthcare services—the list is only limited by money and imagination.4
Extreme economic inequality harms the international competitiveness of the country. There is no social indicator worthy of study that doesn’t worsen as inequality rises: life expectancy, literacy, infant mortality, homicides, imprisonment, teenage pregnancies, obesity, mental illness—you name it. This creates a huge financial loss for our society and culture. Human potential is wasted, or not developed, because people are not in the right place with the right parents and right connections. Then we have to spend money dealing with the consequences of inequality—prisons, police, home security systems, drug and alcohol treatment, and mental health services. Is this really the best use of billions of dollars which could be better spent on behalf spent of millions of lives across multiple generations?5
But some of the worst consequences of extreme economic inequality happen because of the slow unraveling of the feeling that “we’re all in this together.” We no longer have a coherent narrative for getting ahead—what is that narrative? “Going to college is wonderful, but it would be even more wonderful if your roommate is the next Mark Zuckerberg” (?!)….That’s not a narrative most people can follow—that’s just plain luck.6
And increasingly, we’re not all in this together. Another major consequence of extreme inequality is growing economic segregation. We live around people that are just like us. This erodes the social order one little bit at a time.7 We not only don’t know how the other half lives, we don’t know how the people just below us on the economic ladder live. The lack of empathy for and long-standing concerns about police shootings of African Americans is a consequence of economic segregation as much as anything else.8 Why not just pay the police to keep “those people” away from us?
Extreme inequality and economic unfairness fuels the “politics of displacement,” a term my colleague Scott Fitzgerald and I use to describe political discourse—we’ll fight about anything…except money. And in the United States, just about anything will do—if one politician suggests the economic system is rigged and something needs to be done about it, then it’s time to bring up transgender bathrooms, gay marriage, sharia law, school prayer, global warming science, etc.—literally anything will do (just look at the RNC platform) as long as the conversation about economic fairness is stopped dead in its tracks.9
Finally, as one can see during this 2016 election season, extreme inequality contributes to open expressions of racism and cultural bigotry. Stagnant mobility, flat and declining incomes, and poor job prospects are a reality for many people. Most of those people are white. Their concerns have been ignored. Granted, some recent responses have been ugly, but we would be unwise to deny that there’s a real problem here.10
Why are social scientists and policy analysts missing the boat?
My main answer is that we’ve focused too much on gender and racial gaps at the expense of explaining economic inequality within groups.“Most economic inequality is not generated by race and gender differences.”
The pervasive emphasis on gender and racial gaps would lead to the impression (especially in sociology) that most economic inequality is tied to race and gender. But empirically this is not true, and it hasn’t been for at least thirty years. Most economic inequality is not generated by race and gender differences, and inequality has been growing within groups far faster than it has been growing between them.
There is scarcely a piece of empirical evidence that doesn’t support this claim. The ratios of top 5 percent to the mean in the bottom 20 percent in household income within racial groups has grown from 4 to 1 to 11 to 1 from 1970 to 2014. Gini ratios of income inequality have increased uniformly for all racial/ethnic groups and converged. From 1970 to 2014, gender and racial gaps in income have been closing. Gender gaps have closed in part because men’s real earnings have fallen, not because women’s earnings have risen.
We also focus too much on educational opportunities as an avenue for reducing economic inequality.“More education without a series of other structural changes won’t do much to combat the economic inequalities we see.”
Most thoughtful people think an educated populace is a good thing for a variety of reasons. But will greater access to educational opportunities reduce extreme economic inequality? It’s difficult to see how. More education without a series of other structural changes won’t do much to combat the economic inequalities we see. There are several reasons for this. There is more income inequality among people with college degrees than there is between people who have college degrees and those that don’t. The value of an educational credential is tied to the number of people who have it. Do college degrees fetch premiums because of what the college educated know or because of their relative scarcity? We don’t know for sure. Some of the “education gap in income” (especially for men) is happening because incomes for men with high school educations and less are dropping like a rock, not because the college educated are making more money. And there is quite a bit of evidence that college-educated workers are replacing non-college-educated workers at jobs that are not more skilled—college-educated people are being hired because they’re available. And increasing educational access to new groups will simply lead to new activities by advantaged groups to distinguish themselves (for example, the spread of expensive unpaid internships).
In the end, labor markets can treat educated workers just as badly as uneducated ones. There is no magic educational formula that gets rid of economic inequality by promoting more education. There is no convincing mechanism there—only a static comparison.
Recently we have also placed a lot of emphasis on interpersonal interaction and the accumulation of social slights. Much of this emphasis comes from well-founded research in social psychology.
While it is true that social slights and “microaggressions” are interpersonally harmful, the social segregation that has accompanied the creation and maintenance of extreme inequality suggests that most social and economic inequality now is produced through total social exclusion. In most social situations, we interact with people that are not really very different from us. They all have PhDs, MBAs, JDs, or they are welders, construction workers, secretaries, and office assistants. Those who happen to be considered for high-status roles are from such a select group that the remaining social slights they experience are at the end of a long selection process they’ve already benefited from. This problem even influences much of the research the public pays attention to. Just in the past year in the New York Times we’ve been treated with stories on gender inequality among corporate CEOs and CFOs, the underrepresentation of women on corporate boards, and gender inequality among hedge fund managers (!). Are these really the most important stories about social inequality in our nation right now? I seriously doubt it. But these stories resonate with New York Times readers.
Finally, the emphasis on gender and race has led many to believe that the majority-minority society of the future will produce a more just economic system.
But how exactly will this come about? Most of the poor are white and, in an economy where 80 percent of the population is economically stagnant or downwardly mobile, most of the downwardly mobile for the foreseeable future will be white. The statistics on this, especially post-2008, are startling. From 2000-2014 the increase in the number of white people classified as poor almost surpasses the number of African Americans and Latinos classified as poor altogether. Further, there are almost more poor white people (not just the newly poor) than there are African Americans and Latinos of any economic class. And this isn’t going to change for the next thirty-plus years.“Fighting economic inequality is ultimately done by… creating economic and political institutions that address it and not some proxy for it.”
What do we need to do? In short, our traditional emphases need to change. More education won’t fix economic inequality. Closing gender and racial gaps won’t fix economic inequality. Focusing on interpersonal slights won’t fix economic inequality. Instead, fighting economic inequality is ultimately about fighting for higher quality jobs that pay good wages. Fighting economic inequality is ultimately done by … fighting economic inequality and creating economic and political institutions that address it and not some proxy for it. To paraphrase the old Hertz Rent-A-Car commercial, “there’s fighting inequality and there’s not exactly … be sure to choose the right one.”